Redditors took on hedge funds over GameStop stock and won. So what now?
Video game retailer. That's not doing business. Right now just toppled in value on friday. Game stop was worth forty three dollars a share and a bunch of people got together on read it on a message board called wall street bets and they just decided. Let's buy up game. Stop stock and push prices higher and higher now a sheriff game one three hundred and forty seven dollars. Those read it. Based investors made lots of money they have also up ended the entire stock market and bled dry a bunch of hedge funds so much so the white house and treasury now monitoring. What's going on erin. Griffith is also monitoring. What's going on as a reporter for the new york times and she joins me now a aaron. Can you explain. I the origin. There's so there's a reddit thread where people talk about. Trading on wall street stuff called wall street bets is that right right and has about two million users i think and it's not just unrooted. They're also lots of other places on social media where people are gathering talk about stocks. Obviously out there on twitter there on dischord channel which actually shut down today for reasons that are unrelated but the mets people getting together and talking about stocks and it's become extremely popular in the pandemic because While there's no sports the worse there's not a lot of gambling. People are bored and so robin hood which is a stock trading app that has a mission of democratising investing has become extremely popular over the last year. A lot of people are day trading. Now right to robin was. Yeah so basically that. That's where it started right so you can get other robinhood app and thousand dollars or five hundred dollars or you don't have to have some huge amount of money right. You go on this board now. The origin of this as i understand it was it was kind of a troll and it was a troll directed at a bunch of hedge funds had made what's called shorts. They were betting the game stopped. Stock would go down. because it's business looked imperil. does that. is that how it worker started. Yes yes basically A lot of red investors have some kind of vendetta against shortsellers. I'm part of this comes from elon. Musk tesla is one of the most shorted most bet against stocks. And he has. This kind of say is very anti short-selling and So there's kind of manipulation that you can do where if the stock goes way up the short seller's hedge funds that are betting against the company betting on its docks no down. They get squeezed and the higher. The stock goes the more you know. The more the more money they're losing it can become really ugly for them and so they have the the traders know this and they kind of turned it into a game. This is the first time happened before of till ray. Which is a cannabis. Had that happen to them before. But it's definitely the first time it's happened at this scale right so that's interesting. I don't think i that elon. Musk doesn't like shorts. And a lot of people that run companies don't like shorts because what shortsellers do is say we bet on. You're gonna you're doing bad and our selves can drive your stock down. So they go and they look at this stock game. Stop that a lot of wall street hedge funds and said you're in trouble. We're going to bet against you. And they were like we'll take the other side of the bet. We'll rally to rescue the day game. Stop stock and am i right that there's like multiple hedge funds that have now lost billions of dollars on this. I don't know how many have have lost and how much. But there's there's definitely. At least one hedge fund. Melvin capital that had to take a three billion dollar bailout a from a fellow fund over rumors that by the going out of business. They denied that anyone who is short on the stock shorting. A stock is extremely risky. And so anyone who had that position is is definitely hurting right now and tweeted about drawing more attention to it in now all this news coverage the fact that the stock was halted nine times yesterday. The trading was because of so much volatility is drawing more attention to it getting more people sort of rallying in this area absurd mischievous game. So here's what i don't quite get like. At a certain point. I guess this started to get momentum of its own because it doesn't seem like the number of people who've downloaded the robin hood app and are on this reddit. Thread kinnock possibly account for the volume. That is pouring into this stock. Yeah i think. That's a good point. And i think a lot of people are sort of framing like oh this is the little guys rising up against the evil hedge funds and i mean that is worth noting that the hedge funds are also in wall street. Beds there look. They're following this. They're looking at what people are doing. And there are definitely enough people who are day trading on robin to to kind of move. The market share significant are move the market cap significantly of small or thinly traded companies. So big investors are following this now too. I mean you saw a who's very prominent. Silicon valley investor. Tweet that he was following it to i. There's probably some some big money playing in this alongside the read the verdict